Value Investing Strategies of Warren Buffett and Benjamin Graham

A few days ago, Warren Buffett had a live appearance and interview session on CNBC Squawk Box with Becky Quick. The session was pretty long and a part of it was for Warren to answer a series of email questions from CNBC’s readers. I’m producing a summary of some points from the interview. Some of these are his replies to questions from the emails:

There has been a lot of de-leveraging, and there’s more to come.

Even though the US has not meet the technical definition of a recession, it is already in one. He deduces this from lots of indicators, including sales at his businesses and the reduction in people’s net worth.

Over the long run, the US economy will do fine.

Ben Bernanke has a tough act balancing the economy and inflation.

While stocks are not cheap now, they are not extreme either. He’s waiting for them to become very cheap. More value can be found in bonds now.

While agricultural commodities may not continue to rise, the price of oil will probably go higher because the supply is finite while consumption continues to grow.

Most hedge funds do not justify their fees. Hedge fund mania will fade with time.

Company’s CEOs doing a good job include Costco and General Electric.

Rather than buy a lottery ticket, gamble at Atlantic City or invest in Ambac, a person should just buy a low-cost and no-load mutual fund.

US dollar should continue to fall as long as trade deficit continues. He’s not shorting the US dollar currently as the carrying cost is too high.

Buffett believes in free trade, but he thinks we shouldn’t “force feed” U.S. dollars to other countries by importing more than we export.

A weaker dollar helps exports.

If you loan too much money on anything, you’re going to lose money, if the companies borrowing are good.

Ethanol is an inefficient way of upgrading gasoline.

The market is there to serve you, not instruct you.

Sometimes he makes mistakes in judging the honesty of a person, and sometimes they change over time. Therefore when buying a company, he likes to buy from the second of third generation of a family business.

When asked about alternative energy, Buffett says he doesn’t guess what will do well in the future. He sticks to basic stuff he can understand.

Soveriegn wealth funds are inevitable as the US is spending more than she is earning.

The corporate culture at Berkshire is unlikely to change much after his death.

Examples of smart people in financial matters: Bill Gross, Charlier Munger and the four people he has identified to succeed him.